TUTORIAL 6.docx - TUTORIAL 6 VARIANCE ANALYSIS FORMULA OF BASIC VARIANCE ANALYSIS Variance as a percentage Variance = Actual cost Standard cost Standard

# TUTORIAL 6.docx - TUTORIAL 6 VARIANCE ANALYSIS FORMULA OF...

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TUTORIAL 6 : VARIANCE ANALYSIS FORMULA OF BASIC VARIANCE ANALYSIS Variance as a percentage Variance (%) = Actual cost - Standard cost x 100% Standard cost Total sales revenue variance = Actual sales revenue - Budgeted sales revenue = (ASP x ASV) - (BSP x BSV) Activity (or volume) variance = (Actual sales volume - Budgeted sales volume) x Budgeted sales price = (ASV - BSV) x BSP Selling price variance = (Actual selling price - Budgeted selling price) x Actual sales volume = (ASP - BSP) x AV Total materials cost variance the difference between the actual cost of direct materials used for the actual production and the standard materials cost of the actual production Total materials cost variance = Actual materials cost - Standard materials cost = AC - SC Materials price variance the difference between the actual price and the standard price of the actual quantity of materials Materials price variance = (Actual materials cost - Standard materials cost) x Actual quantity purchases = (AP - SP) x AQ Material usage variance the difference between the actual quantity used for the actual production and the standard quantity to be used for the actual production at standard price of materials Materials usage variance = (Actual quantity - Standard quantity) x Standard price = (AQ - SQ) x SP Total labour cost variance the difference between the actual labour cost for actual production and the standard labour cost of the actual production Total labour cost variance = Actual labour cost - Standard labour cost = AC - SC Labour rate variance the difference between the actual labour rate and the standard labour rate for the total actual hours Labour rate variance = (Actual rate - Standard rate) x Actual hours = (AR - SR) x AH
Labour efficiency variance the difference between the actual hours actively worked for the actual production and the standard hours to be worked for the actual production valued at the standard labour rate Labour efficiency variance = (Actual active hourly worked - Standard hours) x Standard rate = (AH - SH) x SR Labour idle time variance Idle time is time spent without any production May be caused by machine breakdowns, blackouts, bottlenecks in production or shortage of resources Labour idle time variance = Idle time hours x Standard labour rate Total variable overheads variance the difference between the actual variable overheads incurred and the variable overheads absorbed Total variable overheads variance = Actual VOH – Absorbed VOH = AC – (VOAR per hour x SHP) = AC – (VOAR per unit x Actual units produced) Variable overheads expenditure variance the difference between the actual variable overhead incurred and the variable overheads that should be incurred for the actual hours worked Variable overheads expenditure variance = Actual VOH incurred – Planned VOH for the actual active labour hours worked = AC – (AH x VOAR) Variable overheads efficiency variance the difference between actual active hours worked for actual production and the standard hours needed for the actual production

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